Correlation Between Dollarama and Loblaw Companies
Can any of the company-specific risk be diversified away by investing in both Dollarama and Loblaw Companies at the same time? Although using a correlation coefficient on its own may not help to predict future stock returns, this module helps to understand the diversifiable risk of combining Dollarama and Loblaw Companies into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Dollarama and Loblaw Companies Limited, you can compare the effects of market volatilities on Dollarama and Loblaw Companies and check how they will diversify away market risk if combined in the same portfolio for a given time horizon. You can also utilize pair trading strategies of matching a long position in Dollarama with a short position of Loblaw Companies. Check out your portfolio center. Please also check ongoing floating volatility patterns of Dollarama and Loblaw Companies.
Diversification Opportunities for Dollarama and Loblaw Companies
0.59 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Dollarama and Loblaw is 0.59. Overlapping area represents the amount of risk that can be diversified away by holding Dollarama and Loblaw Companies Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Loblaw Companies and Dollarama is a relative statistical measure of the degree to which these equity instruments tend to move together. The correlation coefficient measures the extent to which returns on Dollarama are associated (or correlated) with Loblaw Companies. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Loblaw Companies has no effect on the direction of Dollarama i.e., Dollarama and Loblaw Companies go up and down completely randomly.
Pair Corralation between Dollarama and Loblaw Companies
Assuming the 90 days trading horizon Dollarama is expected to generate 1.42 times less return on investment than Loblaw Companies. But when comparing it to its historical volatility, Dollarama is 1.03 times less risky than Loblaw Companies. It trades about 0.06 of its potential returns per unit of risk. Loblaw Companies Limited is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest 17,440 in Loblaw Companies Limited on August 25, 2024 and sell it today you would earn a total of 389.00 from holding Loblaw Companies Limited or generate 2.23% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Dollarama vs. Loblaw Companies Limited
Performance |
| Timeline |
| Dollarama |
| Loblaw Companies |
Dollarama and Loblaw Companies Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Dollarama and Loblaw Companies
The main advantage of trading using opposite Dollarama and Loblaw Companies positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Dollarama position performs unexpectedly, Loblaw Companies can make up some of the losses. Pair trading also minimizes risk from directional movements in the market. For example, if an entire industry or sector drops because of unexpected headlines, the short position in Loblaw Companies will offset losses from the drop in Loblaw Companies' long position.| Dollarama vs. Canadian Tire | Dollarama vs. Loblaw Companies Limited | Dollarama vs. Metro Inc | Dollarama vs. Canadian National Railway |
| Loblaw Companies vs. Metro Inc | Loblaw Companies vs. George Weston Limited | Loblaw Companies vs. Canadian Tire | Loblaw Companies vs. Dollarama |
Check out your portfolio center.Note that this page's information should be used as a complementary analysis to find the right mix of equity instruments to add to your existing portfolios or create a brand new portfolio. You can also try the Sign In To Macroaxis module to sign in to explore Macroaxis' wealth optimization platform and fintech modules.
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